Business

Hype and caution on massive shale gas project

Updated
January 24, 2013 12:55:00

There's been much hype around the confirmation of South Australian shale oil reserves estimated to be worth hundreds of billions of dollars. The South Australian Government says the project could meet the nation's oil requirements but it's still not clear if it will be economically viable.

ELEANOR HALL: The US shale oil industry claims that it can help deliver the United States from its dependence on external oil sources.

Now the industry is floating some massive numbers about a shale oil project in South Australia.

The company backing the project says the reserves could be worth hundreds of billions of dollars.

Rebecca Brice has more.

REBECCA BRICE: The big numbers are in two reports released by Linc Energy. Peter Bond is the chief executive.

PETER BOND: Some of the best measurements in terms and are at the upper limits of being around 233 billion barrels of oil potential and that's recoverable and if you stress test it right down and you only took the very sweetest spots in the absolute known areas and you do nothing else, it's about 3.5 billion and that's sort of worst case scenario. So if you took the 233 billion, well, you're talking Saudi Arabia numbers. It's massive, it's just huge.

REBECCA BRICE: Unlike conventional oil deposits, shale oil is trapped inside the source rock. In this case in the Arckaringa Basin about 1,000 kilometres north of Adelaide.

It's extracted by drilling wells and using hydraulic fracturing, more commonly known as fracking.

Linc Energy is talking up the project to attract exploration investment. They're also attracting the attention of South Australia's Resources Minister Tom Koutsantonis.

TOM KOUTSANTONIS: If the resources recoverable, whether it's you know, a few million barrels of oil a year to a vast amount, either way what we're seeing is untapping shale reserves that are likely to be able to, at the very least, supply Australia. But look, again, it's a long way, it's a long way from domestic production. I mean I've got a lot more work to do but this is a very, very serious project with very, very serious players involved who are doing some quite significant work.

REBECCA BRICE: John Young is a senior resources analyst at Wilson HTM.

JOHN YOUNG: The numbers that are coming out are quite big but I think we need to recognise these represent at this point in time what people believe to be there and what might be able to be recovered from them but we've still got some significant way to go before people have actually commercially recovered resources out of these shales.

I think it's unwise to hang one's hat too much on the size of the numbers. You know, the numbers are going to be very large but we really need to move from that in terms of this focus around the quantity to ultimately one of the quality of the resource - how good is it, how economic will it be and that's going to take a significant amount of exploration and appraisal work before the industry's in a position to determine that.

REBECCA BRICE: Tom Koutsantonis says he's not talking it up too much.

TOM KOUTSANTONIS: These people are powering Australia. The Government's job is to encourage them, to help them, to remove any risk, any sovereign risk, to give them a good regulatory framework in which they can operate and work.

It is not my job to go out there and sell them shares and I'm not attempting to do that at all.

REBECCA BRICE: Peter Owen is from the Wilderness Society.

PETER OWEN: Some of our biggest concerns around this particular project are this coal resource sits below the Great Artesian Basin, you know, a very, very ancient and critically important aquifer that spreads right throughout central Australia and we, you know, can't do or carry out activities that are going to risk those water resources.

So that's obviously a serious concern. Another concern is that the central Australian deserts are some of the most intact desert systems left anywhere in the world.

REBECCA BRICE: The company is optimistic it will see oil flowing in the next couple of years.